The Impact of Corporate Social Responsibility Disclosures on The Cost of Capital: The Trade-Off Between Cost of Equity and Cost of Debt
DOI:
https://doi.org/10.47654/v30y2026i4p131-156Keywords:
Corporate Social Responsibility Disclosures, Cost of Capital, Cost of Equity Capital, Cost of Debt, Trade-off relationshipJEL Classifications:
G12, G32, G34Abstract
Purpose: This study examines the impact of corporate social responsibility disclosures (CSRD) on the cost of capital (COC), covering both cost of equity (COE) and cost of debt (COD). The findings can guide managers and investors regarding the role of CSR disclosure in their capital structure decisions.
Design/methodology/approach: The research uses a sample of 225 nonfinancial firms listed on the Vietnamese stock market between 2014 and 2019. The System Generalized Method of Moments (System GMM) estimator is used to address the potential endogeneity issue and other defects.
Findings: First, the results of the study suggest that firms with higher CSRD tend to have lower COE and COD, confirming the beneficial effects of CSRD, especially in the context of a developing country. Second, firms that are engaged in CSRD tend to enjoy lower COE than COD. This could be because debt providers receive less benefit from extra information on CSR, compared to equity holders. This link has not been examined in the extant studies.
Originality/value: Previous studies tend to discuss the effect of CSRD on either COE or COD, and none have delved into the relationship between the two types of cost. By exploring the priority in the reduction of COE and COD (or the examination of the COE-COD trade-off), this study adds to the body of knowledge on the link between CSRD and COC, as well as brings important implications to the management of capital structure and CSR activities of firms.
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Copyright (c) 2026 Vang Dang, Thuy Cao, Khuong Nguyen (Author); Liem Nguyen (Corresponding Author)
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